Elpida Is Seeking Capital Alliance with Micron Technology - Report.

Elpida Memory, a struggling maker of dynamic random access memory (DRAM) from Japan, is reportedly seeking to create an equity tie-up with Micron Technology, according to a report from a local news-paper.

The Tokyo-based company told banks it intends to boost its share in the market for DRAM chips jointly with Micron, the Yomiuri newspaper reported on Wednesday, without disclosing sources of the information, reports Bloomberg news-agency. Elpida reportedly told its main lender that the alliance with Micron would secure a combined market share of more than 20%, which should allow it to better compete against Samsung Electronics, Hynix Semiconductor and other rivals, according to a Reuters report.

"I believe Micron has the superior technology. It would be good for the industry, because it would lead to coordination between the two and therefore effectively consolidation into three major groupings in the DRAM space," said Damian Thong, analyst at Macquarie Capital Securities.

Currently, Elpida’s cash is down to ¥110 billion, approximately $1.429 billion, but the company’s total debt amounts to around $6.26 billion, 60% of Elpida’s total assets. ¥37.4 billion (approximately $486 million) of Elpida’s total debt comes from the Japanese government’s recapitalization program and must be repaid by the end of April 2012. In the face of this pressing deadline, Elpida has no choice but to look elsewhere for funds, which has fueled industry speculation of a merger or acquisition.

Steve Appleton, chief executive officer of Micron, said last month that consolidation in the DRAM sector was inevitable as weak prices sap chipmakers' cash.

"I think that a number of those companies continue to weaken. As they do continue to weaken, they're going to have to figure out what they are going to do. So, I think that will drive some further consolidation, I think that is inevitable. So, we are just going to continue to look at whatever opportunities might exist out there," said Mr. Appleton.

Elpida was quick to comment on the matter saying that it would like to "make clear that today's media report concerning its business alliance with capital involvement are not based on information announced by Elpida".

"In regard to Elpida's business operating funds we note the following: In addition to the recently announced investment by one of the company's strategic partners in an Elpida subsidiary we are discussing advanced payments and capital investments with customers. Elpida also continues to discuss with its major banks the refinancing of borrowings so that company business operations can be conducted normally," a statement by the company reads.